Home Prices Continue to Weaken: Down 0.6% in October
Almost without exception, individual markets tracked by the FNC 30-MSA composite index declined in October.
FNC’s latest Residential Price Index™ (RPI), released Wednesday, indicates that October U.S. home prices continued to weaken at a modest pace despite recent positive home-sales data. The trend is a reminder that the housing market remains constrained by weak economic fundamentals and the overhang of distressed properties. October marks the third month of continued price declines and is unfortunately accompanied by a moderate downward index revision to the previous month.
Based on the latest data on non-distressed home sales (existing and new homes) through October, FNC’s national RPI shows that single-family home prices fell in October to a seasonally unadjusted rate of 0.6%. The September index value is revised downward from -0.4% to -0.9%. As a gauge of underlying home value, the RPI excludes sales of foreclosed homes, which are frequently sold with large price discounts reflecting poor property conditions. The RPI is the industry’s first hedonic price index − built on a comprehensive database blending public records with real-time appraisals of property and neighborhood attributes. One of the key advantages of the RPI is its ability to capture intrinsic home price trends by modeling observed sales prices as being determined by property and neighborhood attributes.
All three RPI composites (the National, 30-MSA, and 10-MSA indices) show modest month-to-month declines in October. For September, the 30-MSA and 10-MSA composite indices are similarly revised downward from -0.4% and +0.2% to -0.9% and -0.8%, respectively. These downward revisions, triggered by more sales data trickling in, suggest that the weakening of home prices was initially underestimated.
The year-to-year trends in the national RPI are largely unchanged, hovering near -4.7% in the last three months. The 10-MSA composite index, on the other hand, shows improvement in the rate of year-to-year declines. At -3.6%, October marks the smallest year-to-year decline since October 2007 when the mortgage crisis began to deepen quickly.
Almost without exception, the individual markets tracked by the FNC 30-MSA composite index declined in October. The biggest declines occurred in Tampa (-3.1%), Baltimore (-3.0%), Sacramento (-2.3%), San Francisco (-1.9%), Boston (-1.9%), and Dallas (-1.8%). Home prices in markets including Columbus, Detroit, Los Angeles, New York, and Orlando weakened only slightly. Chicago, Minneapolis, and St Louis are the only markets where October home prices remain slightly higher than September.
Year to date, Houston, San Francisco, Minneapolis, Detroit, and Dallas are among those showing the best price appreciation, up 6.1%, 4.5%, 4.1%, 3.3%, and 1.0% respectively. Significant index revisions for the Boston market as more recent sales data are made available have resulted in only a 0.5% year-to-date price appreciation. The worst year-to-date price declines are seen in Tampa (-9.7%), Las Vegas (-8.7%), Baltimore (-8.7%), Phoenix (-7.3%), Orlando (-7.1%), and Miami (-6.5%).
Year to year, Tampa, Las Vegas, and Orlando lead the nation in annual price depreciation, down 12.9%, 12.2%, and 11.8%, respectively. Double-digit price declines are also seen in the Phoenix, Baltimore, Atlanta, and Seattle markets. San Francisco marks the only bright spot where home prices show a solid appreciation of 2.9%.
Peak to date, nearly one-third of the component markets of the FNC 30-MSA composite index are seeing home prices falling more than 50% from the peak of the housing market. Only two Texas cities, Houston and San Antonio where the housing bubble was more modest, show price appreciation since July 2006.